The U.S. Department of Labor (“DOL”) recently announced that its final rule (the “Final Rule”) on disability claims procedures for employer-provided disability benefits will go into effect on April 1, 2018. The purpose of the Final Rule is to provide workers with new procedural protections when dealing with plan fiduciaries and insurance providers who deny claims for disability benefits.
The requirements outlined in the Final Rule apply to ERISA plans that (1) condition the availability of a benefit upon a showing of disability; and (2) require the plan administrator or its delegate to make a determination regarding the claimant’s disability. An ERISA plan that conditions a benefit upon a disability determination that is made under another plan or by a third party, such as the Social Security Administration, is not subject to the disability claims procedures outlined in the Final Rule.
Claims Procedures Requirements
The new claims procedures requirements imposed by the Final Rule are outlined in a DOL fact sheet. They are also summarized below.
- A plan must explain why it denies a claim and the reasoning behind the decision, including an explanation of why it disagrees with any third party determination presented by the claimant in support of his or her claim.
- A claimant must receive any internal rules, guidelines, protocols, standards, or other criteria that the plan relied on in denying the claim, or confirmation that no such information exists.
- A claimant must be informed of his or her right to receive copies of all documents and records related to the claim.
- Prior to a final decision on appeal, a claimant must be provided with a reasonable opportunity to review and respond to any new or additional evidence that the plan relied on with respect to the claim.
- A claimant must be informed of any contractual limitations period that applies to the claimant’s right to bring an action under ERISA.
- Cancellation of disability coverage that has a retroactive effect must be treated as an adverse benefit determination, requiring that the participant be given the opportunity to appeal the decision.
- Notices and disclosures must be written in a culturally and linguistically appropriate manner.
Failure to Comply with Procedures Requirements
If a plan fails to comply with the requirements imposed by the Final Rule, aggrieved participants may be allowed to pursue legal remedies, including filing suit in federal court for denial of benefits. This will be the case unless the failure did not cause prejudice to the participant, was for good cause, and was not part of a pattern of non-compliance.
What Employers Should do Next
The Final Rule increases the obligations of plan administrators and fiduciaries in reviewing and making disability claims decisions. Employers should consult with legal counsel to determine whether any of their employee benefit plans are subject to the new disability claims procedures. Plans that are subject to the new procedures, including both stand-alone plans and wrap plans, should be reviewed and amended, as necessary, to comply with the new rules by April 1, 2018. Please contact a Foster Swift employee benefits attorney if you would like to discuss your obligations under the Final Rule or if you have any questions.